CSC set to write-off £1bn spent on NPfIT

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Computer Sciences Corporation has been told by the UK government that it will not get a long-anticipated revised NHS IT deal from the UK government worth up to £2 billion.

As a result, the US IT services firm has warned investors it will potentially get no deal at all, and will now have to write off £1 billion invested in the National Programme for IT in the NHS to date. CSC has withdrawn its financial outlook for fiscal year 2012.

The move comes after the UK government told the firm it would not sign a re-negotiated version of CSC’s £3 billion local service provider contract for the North, Midlands and East, a deal CSC has been unable to deliver against.

The IT services firm has been very publically criticised by UK politicians over its performance on the deal and, in particular, its failure to deliver the Lorenzo 'strategic' electronic patient record system to acute trusts.

However, as recently as November CSC told investors it thought a new deal would be signed which would prove profitable.

In its latest SEC filing, CSC says it was recently informed that neither a memorandum of understanding nor a contract amendment would be approved by the government.

“CSC previously disclosed that in May 2011 it had substantially completed negotiation of the terms of a memorandum of understanding with the NHS which set forth the key terms of a reduction in the scope, and related contract value downgrade, of the parties’ agreement relating to the NHS IT programme,” said the American IT services giant in its filing.

“However, CSC recently was informed that neither the MOU nor the contract amendment then under discussion would be approved by the government."

As a result, CSC said it will "recognise an impairment of its net investment in the contract in the third quarter of fiscal year 2012."

And it added: “There can be no assurance that CSC and NHS will enter into a contract amendment or, if a contract amendment is negotiated and entered into, that the contract amendment as finally negotiated will be on terms favourable to CSC."

CSC is developing the Lorenzo electronic patient records system under the £12.4 billion NPfIT, for which it has invested £1 billion ($1.5 billion).

In May 2011, CSC announced it had closed talks on an MoU with the NHS that would see a significant cut in the scope of the contract, in return for steep savings in contract value – approximately £700m.

However, this was overtaken by the coalition government announcing a review of NPfIT led by the Cabinet Office’s Major Projects Review Body, which has declined to sign the deal that had been reached.

A damning review of NPfIT and the CSC’s performance was published by the National Audit Office in May and the House of Commons' Public Accounts Committee in August.

The UK’s coalition government subsequently said in September that it would “urgently dismantle” NPfIT, of which CSC’s remains the largest contract, and give local health trusts the power to choose their own systems.

CSC held further negotiations with the Cabinet Office and DH in November on a significantly revised new MoU. In the same month, CSC advised investors that it remained confident of securing a new deal on favorable terms.

The latest, late-2011 MOU is understood to focus on providing a heavily cut down version of Lorenzo to a couple of dozen NHS hospital and mental health trusts. Under the original contract, over 100 NHS trusts were to get state of the art EPR systems.

CSC said until it closes talks for a possible contract amendment, it is unable to estimate the exact amount. The impairment could be equal to CSC's net investment in the contract, which, as of November 30, 2011, was about £934m ($1.5 billion).

CSC said it expected to resume discussions with the NHS in the New Year.

We could chat for hours on what might or might not have happened in the past and whether NPfIT could ever have delivered on its early promises but there are so many elephants in this particular room. I just wish I had some answers!

Without a new MoU, does the most recent version of the contract still hold? If so, what exactly were CSC's commitments under that contract?

Will CSC continue to support their "interim" systems such as iPM?

What happens to all the CSC-led TPP implementations which were awaiting the MoU to go ahead?

CSC/iSOFT are right to admit that their Lorenzo contract with the NHS is likely to be cancelled, this has been reflected in the "re-balancing" of the CSC share price. But what should CSC do now?

Should they stop developing Lorenzo and just maintain it as a modern PAS? Should they carry on with the development in the hope that acute hospitals will prefer single database integrated products in the future - as has happened with the EPIC product success in the US?

Should they shelve Lorenzo altogether and develop best of breed systems integrated with Enterprise Service Bus software?

Many Acute NHS Trusts have made a substantial investment in iSOFT over the past 20 years and it is important that CSC make the right decision on future direction.

If the proposed MOU won't be approved, does this mean that the entire CSC set of contracts (there are 3 different onees AFAIAA) will be terminated?

If so, what does this imply for the non-acute sector, especially primary care and general practice?

NPfIT was about providing Detailed Care Records - but the contracts included a good deal more than Acute Trust systems - and did not include any requirement for the Acute equivalent of transfer on the model of GP2GP!

I can not agree with the two comments above, the LSP model was never going to work for reasons to many to go into here and now apart from two key ones

1. The systems which were being proposed were not NHS aware or were not even built yet.

2. The NHS is not a static organisation or business domain (in the way that London and the congestion charge is %u213 bar price and are increases) meaning that any one size fits all approach was doomed from the outset.

By the time new systems were developed to replace the systems which already existed and functioned all over the NHS the business itself was changing at a rate the LSPs had no hope of keeping up with, rendering their solutions useless before they ever went live. Look at the amount of bespoke development Cerner had to do to make its solution work in just 6 Trusts.

At this scale its akin to getting an oil tanker to turn on a dime, its jus never going to happen.

Another issue relates to the blind adherence to standards. I have nothing against them and in general they are a good thing but when push comes to shove suppliers do tend to tweak them to make their life easier (just look at the various implementations of HL7 v2.x) again making one size fits all moot.

And then there was attitude expressed by those in NPfIT and the brave new world. I remember vividly my first encounter with a consultant from NPfIT who came to visit us as an existing supplier in relation to SPNE / CAB, there were in fact two of them, their opening gambit was that we should look to get out of NHS IT as there will no longer be a market for you and you should maybe change to a consultancy role. Really I thought, we shall see.

10 years of not very much and a much thinner home grown supplier market as well.

While I agree with much of what you say, lets separate what the LSP model could have been (still could) from NPfIT's product strategy. Yes reinventing a wheel (a lesser wheel as it turns out) was a major error. But the concept of LSP service provision had much going for it, and is similar to many IT services provided in the provate sector.

I would suggest the problems and failures of the LSPs were more associated with their IT products, lack of market knowledge, Trusts not being the "paying user" and arrogance.

But as a vehicle to offer a small/manageable (by them) range of "top quality" applications run, managed and delivered by them to the Trust (perhaps even to the desk), the LSPs should have been able to offer a cost effective way for many in the NHS to modernise, especially non-FTs.

A lost opportunity indeed, but no surprise. Many of us - even those like me who were beavering away on the procurement in Fawlty Towers in Leeds in 2003/4 - were able to see that without two factors - a deliverable comprehensive IT solution (or two) "better" than that which many NHS organisations already had, and imposition of that solution as a mandatory requirement - then NPfIT would never succeed. The reality was that those at the top clearly thought that the success which had been achieved in specifying and then procuring and overseeing implementation of a system to manage "London Congestion Charging" was directly transferable to what was required for the NHS. Oh, and by the way, those who keep lauding NPfIT by saying "...but it delivered e.g., NHSNet, PACS, N3, Spine, Choose and Book etc.," seem to forget that PACS was never inside NPfIT anyway, and only welcomed into the fold when it was clearly going to be a no-brainer success (largely due to pioneer trusts who had been doing PACS stuff out of their own resources), and that all the other "NPfIT successes" were only there to be peripheral/supporting "widgets" and infrastructures for what was supposed to be the gold standard core - the individual, universal, globally-accessible patient/client "Care Record", the achievement of which was supposed to be the prime purpose of NPfIT.

And yes, as you say John, we're now back to "self-determination". Except, of course, we're not. We still have the shards of SHAs with their "legacy" NPfIT/CfH CIOs still strutting their stuff (cf the recent "Southern ASCC fiascos) as if there was still "central funding", and/or that the remaining bits and pieces of LSPs were still expected to deliver EPRs and the like. And because of this, we've still got (especially non-Foundation) Trust Boards and their Finance Directors sitting back in the anticipation and expectation that the DH/Treasury is going to disburse the "unspent NPfIT money" to Trusts to enable "self-determination" to be paid for. Let's get real; any such money is either going to to be kept back to pay the enormous legal expenses which failure of most of the NPfIT is now going to make necessary, or is going to slide gently back into the Treasury coffers to help the UK's current financial situation. "Self determination" is going to mean making a Business Case for IT from whatever existing resources a Trust has.

Yes John, trusts, never mind "modest sized" ones, but all of them are going to struggle for the necessary (IT) staff, skills, and investments. In the private sector, "that's life", and it's now a reality in the public sector.

As you say, the "LSP model could have been just the ticket". It still can be if somebody at the top mandates both the solution and that it must be used by all NHS organisations. But as we both know, that's never going to happen.

Unless, of course, we privatise health/care services, and mandate the IT?

It is a shame that this saga has ended the way it has. Having had quite a few dealings with CSC (and iSoft) over the years I have seen both their good and bad sides. I guess to that the fault is not entirely theirs, but must be equally shared with those who architected and managed NPfIT. Though there is little point in rehashing the history of NPfIT now.

There are many (entrenched) views on all the parties involved here and, despite what politicians say, I doubt and meaningfull lessons have been learned by anyone. Perhaps, at least in my eyes, is the thought that the basic fault/reason for this situation was a failure to appreciate NHS culture, and to offer the Acute sector something less than what it currently had. A lost decade o opportunity.

Now we swing back to self determination. At a time when NHS IT is becomming ever more complex and expensive. When modest sized trusts may struggle for the necessary staff, skills and investments. At such a time the LSP model could have been just the ticket for some.